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Saturday, May 4, 2013

But the Policy Of Cutting Interest Rates Will Also Fail – Don’t
These People Know Nothing?

The recognition that
European economic policy has been a total and complete failure got another
boost as the European Central
Bank cut its lending rate to commercial banks by 25 basis points.

Facing diminished prospects for an economic recovery in the
recession-bound bloc, the ECB cut its main refinancing rate by a quarter
percentage point to 0.50 per cent andMario
Draghi, ECB president, saidthe bank remained “ready
to act if needed”.

The reaction all
around the world – So What. See if
the rate was .75% cutting it to .50% is not going to make any difference to
anyone. If banks were not borrowing from
the ECB and loaning out the money when they could borrow for 75 basis points,
they are not going to change their ways when the rate drops to 50 basis
points.

So why did the ECB do
this? Well one theory might be that
they wanted to send a message to other policy making leaders that no, what Europe has been doing is not working and you need to
change. But more likely is that the bank
is under pressure to do something, and that the people who make the decisions
are just to ignorant to know that what they did is useless.